Oil falls 2 percent as focus shifts to softer demand outlook

Jean-Sebastien Evrard  AFP  Getty Images

In the absence of any significant fundamental developments today, global market developments are likely to be the biggest driver for crude oil prices.

West Texas Intermediate (WTI) crude for September delivery rose as much as 32 USA cents to US$67.95 a barrel on the New York Mercantile Exchange, and traded at US$67.60 at 2.50 pm in Singapore.

BMI Research said oil markets would "struggle for direction, as uncertainty around both the impact on supply from the Iranian sanctions and escalating trade tensions between the USA and China persists".

Front-month Brent crude oil futures were at $72.60 per barrel at 0338 GMT, down by 21 cents, or 0.3 percent from their last close.

Oil held steady even as Turkey's economic strife sparked an emerging-market sell-off, fueling fears of broader market turmoil.

Trade tensions with the USA have weakened currencies in emerging markets as investors pull cash out of countries like India and China and convert it to US dollars, which are still seen as a safe haven.

Escalating trade disputes between the US, China and other countries have dimmed the outlook for economic growth and boosted the US dollar, making oil more expensive for consumers using other currencies.

Five Caspian Sea states reached a breakthrough agreement on sovereign rights to the sea, paving the way for new oil and gas extraction - and pipelines - after more than two decades of disputes.

The last time Iran was sanctioned, about half its current oil exports of some 2.4 million barrels were removed from the market.

For the moment the IEA did not change its forecast for global demand for oil to increase by 1.4 mbd.

U.S. and Brent crude are under pressure early Thursday as investors continue to react to the bearish API data, talk of lower demand and the strengthening U.S. Dollar.

Hedge funds and other money managers reduced their bullish positions in U.S. crude futures and options in the week ending August 7, data from the U.S. Commodity Futures Trading Commission showed on Friday.

Hedge funds and other money managers cut their bullish positions on United States crude to the lowest level since June, data showed on Friday.

Around two-thirds of US oil producers failed to balance costs in the second quarter, despite crude oil prices rising above $70 per barrel, the Wall Street reports.

Despite the cautious mood in oil markets, bullish sentiment found some support from expectations that US sanctions against Tehran would restrict Iranian crude exports, tightening global supply.

Renewed U.S. sanctions against major oil exporter Iran, which from November will target the petroleum sector, are expected to disrupt the market.

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